Seniors beware of tax bill

Within the massive $1.5 trillion tax overhaul bill recently passed by the House is a provision that seems not to be getting much attention – namely, the elimination of the deduction for medical expenses. Under current law, if you itemize, you can deduct qualified medical expenses if the costs exceed 10 percent of your adjusted gross income.

Almost 9 million Americans use the medical expense tax deduction. According to AARP’s Public Policy Institute, nearly ¾ of the taxpayers who claim the deduction are over 50 years old and 70 percent have annual incomes below $75,000. Thus, a senior making less than $75,000 would only need to spend $7500 on medical expenses to cross the 10% threshold. Not an unrealistic scenario when one couples the elimination of the medical expense deduction in the House bill with the Senate’s proposal to reduce the ACA’s individual mandate penalty to $0. The combination of these two changes leaves most seniors between the ages of 50 and 64 with a double whammy – unaffordable health insurance with high amounts of nondeductible healthcare expenses.

According to Health Affairs, removing the medical expense deduction not only affects the taxpayers who need it, but will also increase reliance on Medicaid. Most seniors who reside in long-term care facilities rely on their personal resources to cover their costs. Today many, through no fault of their own, outlive their savings and have to turn to Medicaid for assistance. With this plan seniors would be forced to rely on Medicaid earlier because they would be spending down their savings to pay their higher federal tax bill – resulting in an increased burden on Medicaid systems that are already overburdened.